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Russia and the Iranian Nuclear Issue

By Nikolay Kozhanov

Growing confrontation between Russia and the West has led some experts to think that Moscow may become less interested in finding a comprehensive solution to the Iranian nuclear issue. According to them, resolving the nuclear issue no longer seems to be in Russia’s interests: a deal between Tehran and the West could entail easing sanctions against Iran and returning Western companies to the Iranian market. This would, in turn, create additional difficulties for Russian businesses in the Islamic Republic: in most areas, the Russians are ill-prepared to compete with European and U.S. companies.27 Further, some analysts have said that settling the nuclear issue would deprive the Kremlin of its status as a counterbalance to the United States and the EU in Iran. Consequently, authorities in the Islamic Republic would lose interest in political dialogue with Russia.

Some political analysts have also argued that Russia will not be an effective member of the P5+1 because the group may irritate Iran, whose support is badly needed by Moscow in confronting the West. Other experts have said that Russia may simply decide to blackmail the United States and the EU by threatening that if the West imposes further economic sanctions, then it will reconsider its participation in the P5+1.29

However, for the past two years, the Russians have been actively working to secure an effective dialogue between authorities in Tehran and the West on the nuclear issue. Lavrov’s 2012 proposals set the stage for the current round of negotiations. During the November 2014 talks between Iran and the P5+1, Russian diplomats were actively engaged. On the sidelines of the negotiations, Deputy Minister of Foreign Affairs Sergey Ryabkov held bilateral consultations with almost all of the parties involved. These efforts did not go unnoticed, at least in Tehran. On November 25, 2014, Rouhani personally called Putin to discuss the results of the Vienna negotiations and assure him that Iran intended to continue the dialogue with the P5+1.

He again called the Russian president to discuss the issues of the nuclear talks on March 26, 2015. This happened on the day when the next round of negotiations between Tehran and the P5+1 began in Lausanne. As it was in November 2014, Russian diplomats took an active part in these talks that lasted until April 2. They remained highly satisfied with the results of the negotiations and the parameters of the future final agreement (the so-called Joint Comprehensive Plan of Action) settled between Iran and the P5+1. Ryabkov even expressed his hope that the Joint Comprehensive Plan of Action could be signed by the deadline of June 30, 2015, without any further delays.30

Even the agreement between Russia and Iran to construct new nuclear power units in the Islamic Republic is considered by some analysts as part of Moscow’s efforts to settle the nuclear issue. In their view, this deal helped, at least temporarily, to relieve tensions related to the Iranian demands for the technology that would allow the Islamic Republic to produce its own nuclear fuel. Others have alleged that the Russian-Iranian agreement may have also paved the way for the future use of uranium hexafluoride produced by the Islamic Republic or its relocation to Russia or any third country.31

The Joint Comprehensive Plan of Action has the potential to generate confidence that Tehran will be unable to secretly develop a military nuclear program. Furthermore, even if the Islamic Republic does not honor the deal, the international community will have at least one year to counter Iran’s efforts to break out. This has completely satisfied Moscow. Intense dialogue with the Iranian authorities has also assured the Russian government that Tehran is serious about implementing the nuclear deal. Overall, the Kremlin believes it has the necessary guarantees that Iran’s nuclear program is peaceful.32

As opposed to the above-mentioned negative assessments, an agreement between Iran and the P5+1 would not deal a significant blow to Moscow’s relationship with Tehran. From an economic point of view, Russia has nothing to lose. Over the last eight years, when European enterprises pulled out of Iran, Russian companies failed to make any substantial economic gains. In 2011–2014, Iran’s share of Russian foreign trade even decreased from 0.5 percent to 0.2 percent. By 2014, total Russian investments in the Islamic Republic were also unimpressive: they amounted to less than $50 million.33 At the same time, the areas in which Russian companies have managed to achieve certain successes (such as nuclear energy) are traditional Russian strengths, and Western competition may only stimulate Russians’ activities in these fields.

From a political point of view, a comprehensive deal would also not be a threat to Moscow’s ties with the Islamic Republic. While the nuclear issue remains the most important aspect of Western relations with Tehran, the Russian-Iranian agenda is much broader. Both countries are deeply involved in talks concerning Afghanistan, the Caucasus, Iraq, Syria, and post-Soviet Central Asia. In many cases, they are interested in cooperating on these regional issues. For example, Moscow and Tehran see each other as key players in the negotiations over the legal status of the Caspian Sea. They are also working together to battle drug and human trafficking, cross-border crimes, and terrorist organizations in Asia.

Settling the nuclear issue would not produce a significant negative effect on the Russian-Iranian dialogue; the two sides would remain interested in cooperation on a wide array of issues. A nuclear agreement with Iran may even benefit Moscow: it would eliminate the sanctions that have hindered Russian economic activity in the Islamic Republic and guarantee that Iran would not become another hot spot on the CIS periphery.

Problems Ahead

Despite the potential for improvement, there are serious obstacles that may hamper or even stop the growing cooperation between Iran and Russia.

The formation of a solid political and economic foundation requires time, which is something that Russia and Iran may lack. There are no guarantees that Moscow’s relations with the West will not change and that these changes, in turn, will not affect its interests in Iran. As the Medvedev era demonstrated, Moscow could be tempted to sacrifice some of its stakes in the Islamic Republic for the sake of another reset with the United States.

The two countries’ international positions may also play a role. The growing confrontation with the West has prompted Russia to become very interested in contact with Iran, whereas certain improvements in Iran’s relations with the EU have made the Islamic Republic less dependent on contact with Moscow. And Iran periodically reminds Russia of this by stating its readiness to take steps that are not in Russia’s interests. For instance, on more than one occasion, the Iranian authorities have expressed their readiness to replace Russia as a gas supplier for Europe. So far, these statements have been nothing but political bravado. Yet, it is still possible that in the future Iran could join a project like the Nabucco oil pipeline (proposed to run from the Turkish border to Austria).

Under these circumstances, the Kremlin needs to be inventive to keep Tehran interested in bilateral dialogue as well as loyal to previous agreements. However, this could be challenging: it remains to be seen how far Russia is ready to go in its political contact with Tehran and how much it can offer. The formation of any comprehensive strategic alliance with Tehran is still not in Moscow’s interest, as it could seriously harm Russian dialogue with several other states, including Israel and Gulf Cooperation Council countries. Additionally, Iran’s influence on the ground in Afghanistan, Iraq, and Syria often surpasses Russia’s. As a result, the only assistance that Moscow could offer on these problems is, perhaps, moral support. This, in turn, allows the Iranians to see the Kremlin as only a minor assistant in certain areas (for instance, in Syria).34

Beyond that, on some issues, the Russian and Iranian positions could be close, but it is not certain that they will coincide. The gap in the positions of the two countries, in turn, may create difficulties in their dialogue and even become a source of tension between Moscow and Tehran. This is the case when it comes to the difference between the Russian and Iranian positions regarding the legal status of the Caspian Sea. Iran’s approach to the issue is close to the Russian vision of the situation. However, Moscow and Tehran are far from being in complete agreement, and there are tensions between the two countries. Serious contradictions between them exist on the territorial division of the sea. For example, the two countries failed to reach a consensus on the regime to govern navigation in the zones under national jurisdiction. In addition, Tehran has periodically insisted on the complete demilitarization of the Caspian Sea or, as another option, on limiting the military potential of the five littoral states in the Caspian region and establishing a joint arms control system.

In terms of economic cooperation, the Russian-Iranian dialogue also has its limits. Apart from ferrous metals, wood, and petrochemical products, Russia has a very narrow range of goods to offer Iran—and a continually shrinking range, at that. As officials from the Russian Chamber of Commerce and Industry explain, it is not the international sanctions, China’s growing economic presence in the region, or the Iranian authorities’ intractability that prevent Russian companies from doing business with the country, but rather the growing technological gap between Russia and the West, as well as Russia’s economic problems. Iran currently lacks engineering and technological support, as well as equipment to upgrade and construct oil refineries and liquefied-natural-gas production plants. However, Russia is unable to provide Iran with the required assistance, equipment, and technology. Moreover, it is badly in need of these itself. With Russia’s economic problems mounting, the technological gap will only increase.

International sanctions against Iran also severely limit the options for Russian-Iranian cooperation. As a result, in practical terms there has been little substance behind the intense exchange of high-ranking delegations and ideas. Officials at different levels of Russian government have regularly visited Iran, but the number of investment agreements of a large scale or value signed between the countries is near zero (excluding the 2014 deal on the construction of new nuclear power units in Iran). To date, all discussions regarding multibillion-dollar Russian investments in the Iranian economy, including the hypothetical $70 billion in contracts discussed at the joint commission meeting in September 2014, have not been translated into practice. Moreover, since 2011, the volume of trade between the countries has been consistently falling by more than 30 percent annually, and, by 2014, it had sunk to around $1.5 billion (at least two times lower than Russian-Egyptian and Russian-Israeli trade).35

The Russian-Iranian nuclear deal concluded in November 2014 certainly may improve the situation. However, this contract alone is not enough to boost the development of economic ties. Although the project calls for the construction of eight nuclear units, some leading Russian nuclear analysts say that building more than two power units in Iran within the next decade is barely possible.36 Apart from that, existing punitive measures imposed by the West on Tehran could create problems with supplying the equipment necessary for implementing the projects. Sanctions could also make it difficult to conduct financial transactions. In other words, the Iranian authorities may not be able to pay the Russian contractors.

Conclusion

All in all, in spite of mutual intentions to improve the level of bilateral relations, Russia and Iran have to overcome serious challenges to the practical implementation of their plans.

External factors can create room for future cooperation. The Russian confrontation with the West has made Moscow extremely interested in developing relations with Tehran. Iran has also gradually become disillusioned with the possibility of a quick settlement of the nuclear issue and the complete lifting of the punitive economic measures adopted by the United States, the EU, and their partners. This, in turn, has compelled the authorities of the Islamic Republic to be more active in their dialogue with countries that are ready to cooperate with Iran even under existing sanctions.

Yet, in order to use the chance given to them, Moscow and Tehran need to resolve issues whose natures have little to do with the roles of third parties. Namely, Russia and Iran will need to take a deeper look at their own potential to develop bilateral relations. They have to determine to what extent and in what areas real economic cooperation between them is possible and in what political spheres their collaboration can be effective—in other words, where they can go beyond mere consultations. Without clear answers to these questions, further progress on the dialogue between Moscow and Tehran is hardly possible.